The Pennsylvania Commonwealth Court has upheld a ruling by the state Public Utility Commission (PUC) implementing a three-year, performance-based, gas-cost incentive program for Columbia Gas of Pennsylvania, Inc., a local distribution company (LDC). The program compares LDC spot-market purchases to the New York Mercantile Exchange (NYMEX) average, sharing any savings between the company and ratepayers. The court rejected allegations that state law forbids recovery in excess of prudently incurred actual costs.

The Pennsylvania Commonwealth Court has asked the state Public Utility Commission (PUC) to explain 1) why it disallowed a substantial portion of advertising costs in setting rates for National Fuel Gas Corp., a local distribution company (LDC); and 2) why it had rejected the LDC's request for a separate inflation adjustment of 2.58 percent for 17 cost elements.

The court found the PUC's rationale (em that the LDC's advertising was "in essence targeted to seek and retain load" (em insufficient, since recovery of costs associated with similar advertisements had been allowed in

The North Carolina Utilities Commission (NCUC) has made preliminary assignments of unfranchised gas-service areas to local distribution companies (LDCs), pursuant to a 1995 state law. An earlier NCUC order sought applications from LDCs (see, Re Certificates of Public Convenience and Necessity for Natural Gas Service, 164 PUR4th 591 (N.C.U.C. 1995)).

The U.S. Court of Appeals for the Ninth Circuit has rejected claims that Washington Energy Co., corporate parent of Washington Gas Co., a local distribution company (LDC), committed securities fraud by failing to fully explain that its current application for a rate increase was based in part on expense requests and accounting methods rejected by state regulators in the past.

The Michigan Public Service Commission (PSC) has authorized Ameritech Michigan, a local exchange carrier (LEC), to restructure its rates to comply with a new state law forbidding LECs to charge less than the total-service, long-run incremental cost for each local exchange service offered. The LEC claimed that it began with basic services because prices for that segment of the market had been set artificially low for customers in rural areas of the state.

The Idaho Public Utilities Commission has authorized Intermountain Gas Co., a local distribution company (LDC), to implement a new interruptible-distribution transportation service for large-volume industrial customers, including a charge designed to minimize stranded costs associated with migration of customers from sales tariffs.

An advance peek at the Edison Electric Institute's 1995 Statistical Yearbook of the Electric Utility Industry reveals a general trend toward increase over last year's figures (see Table 1).

s Installed capacity totaled 749,723 megawatts (Mw), up 0.5 percent. Investor-owned utility (IOU) capacity alone rose 0.4 percent. And the South Atlantic division showed the largest increase: 1.6 percent.

s Generation totaled 2,994,529 gigawatt-hours (Gwh), up 2.9 percent. IOUs contributed 2,340,482 Gwh to this total, increasing its output 1.4 percent.

LEASING THE LOOP:

Telephone Service Resale in the Local ExchangeResellers want steep discounts, but local rates don't always cover costs. And reselling local lines provides little incentive

to upgrade the network.The Telecommunications Act of 1996 (Act) compels local exchange carriers (LECs) to sell telephone service to competitors (em who would then resell to the public at retail. Instead of constructing their own local distribution networks, competitors would buy local telephone service from the existing carrier at discounted rates.

By Michael H. Lee and William A. RosquistThe Vanishing LATA:

Pricing Chasms

and Clashing Markets

for Toll Service

Wide disparities can occur in toll rates within some states (em a legacy of multiple LATAs. Now, with

barriers falling, where will prices go?

With competition looming, electric utilities increasingly resort to price discounts, both to retain customers and to alleviate some of the pressure to introduce retail competition. Performance-based ratemaking (PBR), which allows utilities greater flexibility in offering price discounts, is emerging as an integral component of many restructuring proposals.

However, flexible pricing can create inequity among ratepayers.